Pro Trader: Short-Term the Selling Is Exhausting Itself
Pro traders often say the hard trade is the right trade - and buying was definitely hard on Wednesday but late in the session buyers stepped into the market in a big way giving the S&P a positive close for the first time in 7 sessions. And the Fast Money traders were among those buyers.
Of course there were plenty of reasons to hesitate.
In the US, the latest economic data showed activity in the services sector fell in July to its lowest level since February 2010, while new U.S. factory orders dropped in June, pulled down by weak demand for transportation equipment. As a result transportation stocks headed into a tail-spin with investors bailing out of truckers and the rails in a hurry.
And the signals from overseas were just as bad.
The service sector in Italy contracted in June for the second month in a row – while Spain's PMI Index fell below 50 - well into negative territory. Those developments are especially problematic considering Italy and Spain are said to be riddled with financial woes.
Although those negatives seem rather daunting to us, they didn't dissuade our pros.
Instant Insights with the Fast Money traders
”Ding, dong get long,” says Fast trader Steve Cortes during the Halftime Report while the market was still negative. His trading thesis was simple – there’s just too much pessimism in the market right now.
To be clear Cortes was making a short term trading call, however looking at the market in the near-term he says, “the S&P has gone from 1300 to 1240 in almost a straight line – that’s a ton of selling and a lot of pessimism. I’d fade the sell-off.”
And Cortes put his money where his mouth is.
”I’m net long the market as of this morning – with a stop out 1% lower – European markets sold off hard but the euro is up – I think (that divergence) is a sign the selling has exhausted itself for the time being.”
In fact, all the Fast Money traders agree with something Warren Buffett so often says, ‘be greedy when others are fearful.’
”This is a market where you make your list and pick your points,” says trader Pete Najarian. “I jumped into UNP ,” he reveals. “The stock received an upgrade and turned around at $96 its 200-day moving average,” he says. Those are two criteria that made this stock a bargain Najarian just couldn’t pass up.
Trader Zach Karabellsuggests looking at FedEx , which sold-off from the high 90s to the mid-80’s. “Unless you think the global economy is going into a sudden and really dramatic tailspin – you’ve got to look at that as a place to get in,” he says.
Patty Edwards is a little more cautious. But only because she’s worried about Friday’s jobs number and what it could do to the market. However, after that, she concedes that if you trade using a short time horizon, “Cortes is probably right. Play for a bounce.”
GOING FOR THE GOLD
Fears about the economies of the world triggered a rally in the gold market with the precious metal touching an all-time high of $1,640.39 before paring some of those gains.
What's the trade?
Strategic investor Dennis Gartman doesn't see the bull market in gold ending anytime soon. He says, "the trend remains from the lower left to the upper right and it’s likely to continue that way. Gold has simply become a reservable asset and one that people seem to trust."
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Trader disclosure: On Aug 3, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Najarian owns (AAPL); Najarian owns (C); Najarian owns (MS); Najarian owns (TCK); Najarian owns (AAPL) calls; Najarian owns (SLV) calls; Najarian owns (GLD) calls; Najarian owns (BX) calls; Najarian owns (V) calls; Najarian owns (UNP) calls; Cortes owns (WMT); Cortes owns (PM); Cortes is short (LULU); Cortes is short (AAPL); Cortes is short (LVS); Cortes is short (EUR)
For Zach Karabell
Rivertwice Capital & Karabell own (AAPL)
Rivertwice Capital & Karabell owns (GOOG)
Rivertwice Capital & Karabell owns (GS)
Rivertwice Capital & Karabell owns (AGQ)
For Patty Edwards
Edwards Owns (AMZN) For Clients
Edwards Owns (AAPL) For Clients
Edwards Owns (GOOG) For Clients
Edwards Owns (V) For Clients
Edwards Owns (KMP) For Clients
Edwards Owns (WDFC) For Clients
Edwards Owns (ERF) For Clients
Edwards Owns (BMO) For Clients
Edwards Owns (HNZ) For Clients
Edwards is long Gold For Clients
Edwards is long Silver For Clients
Comcast Is The Parent Company Of NBCUniversal
Comcast Is The Parent Company Of CNBC
GE Owns 49% Of NBCUnivesral
GE Owns 49% Of CNBC
CNBC.com with wires.